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China auto sales dip in first quarter

China, the world’s largest auto market, is a needed territory for automakers. And while sales were up in March, a drop in the quarterly numbers has some car makers concerned.

Sales down for quarter 1

According to the China Association of Automobile Manufacturers, auto sales in the Asian nation were down to 4.79 million units for the first quarter of 2012. That is a drop of 3.4 percent from the first three months of 2011. Passenger cars alone saw a drop of 1.3 percent from last year, to 3.77 million cars.

May fall short of projected goal

The CAAM said in March that it feared the automotive market in China would not meet its projected goal of 8 to 10 percent growth in 2012. However, the association has not revised its estimated goal in view of the light quarter.

China faces ‘hangover’ from market boom

“China is holding up, but it’s still suffering from a hangover of the boom in 2009 and 2010. We can expect a fairly sluggish 2012.”

In 2010 the Chinese government offered incentives to encourage its consumers to buy more vehicles. The demand for automobiles rose 32 percent under the incentive programs. Demand dropped to 2.5 percent in 2011 after they expired.

License plate restrictions

Another factor contributing to the slowing auto sales is the license plate restriction implemented in some areas to reduce traffic congestion. The price for a license plate in some parts of Shanghai is nearly $8,000.

Passenger car ups and downs

The passenger car segment grew by 4.5 percent in March, exceeding sales expectations. The sales were driven up by dealer incentives, implemented to counter high gas prices. Unfortunately, the trend was not reflected in the quarterly figures.

The figures come at the same time Ford announced a 13.6 percent drop in its passenger car sales in China for the first quarter of this year. However, lest some predict the death of the passenger car segment, Daimler AG, maker of Mercedes-Benz, posted a 24 percent increase in its Chinese passenger car sales.

Could indicate economic slowing

Many analysts fear that the slowing in auto sales presages a wider slowing of economic growth in China. According to a poll of economists by Dow Jones Newswires, China’s economy grew by only 8.3 percent in the first quarter. That is the slowest increase it has seen in nearly three years.

Andrew Thomson of KPMG’s China automotive, however, says it is too soon to jump to conclusions. He said: